Many companies and organizations are continuing to look for ways to reduce their internal cost of operations and overhead. Implementing LEAN manufacturing principles has become a very important concept and one that may help improve overall efficiency of operations, directly impacting bottom line results. This blog is written for those organizations.

08/30/2012

Contract Manufacturing Continues to Grow While Manufacturing Business Steadies

As American manufacturing appears to have steadied from a growth spurt seen in 2011, contract manufacturing continues a two-year trend of positive growth.

In the recent third annual Design-2-Part (D2P) Manufacturing Trends Survey, 42% of U.S. OEMs indicated that they expect to have more outsourcing projects/purchases in the next year than they had in the past twelve months. The response was a 3% increase over the previous year and an 11% increase from the 2010 survey.

On the other hand, responders indicated a less positive trend for their business in general as only 48% said that business has grown in the past twelve months compared to 51% in 2011.

The survey also asked the OEM engineers and buyers that outsource what their company’s most important factor for measuring manufacturing outsourcing vendors was. “Quality” continues to be the number one priority with 49%, followed by “product cost” with 39%, “delivery” with 9% and “technical support” at 3%. These responses closely resembled within 2 percentage points the answers given in 2011.

Responders were asked questions about where geographically they outsource. First, they were asked, “Where do you currently outsource the majority of your projects?” The most popular answer was “local vendors-up to 100 miles” at 42%, followed by “regional vendors-up to 250 miles” at 20%, “national vendors” at 19%, and “overseas/international vendors” at 20%.

Those who answered “local vendors” were asked “what is the primary reason for using local vendors?” Over half at 56% answered “hands-on access/vendor visits.” “Delivery time” was second at 21%, followed by “support local economy” at 13%, and “cost” at 11%.

Responders who answered “overseas/international” where asked, “What is the biggest Supply Chain risk as viewed by your company?” Fifty percent answered “delivery time,” followed by “vendor stability” at 31%, “shipping costs” with 12%, and “natural disaster” at 7%.

At the end of the survey, the engineers and buyers were given the opportunity to answer two open-ended questions. When asked, “What are the advantages for your company to outsource domestically,” there were five common themes: superior quality, better communication and supervision, reliable delivery, shorter production runs, and “Made in America” pride.

The participants were also asked, “What are the biggest challenges you face from product development through manufacturing in trying to bring a product to market.” Common answers included: industry and government regulations, smaller run quantities, and maintaining quality while dealing with price pressures.

An engineer from Effective Medical Solutions in Homer Glen, IL seemed to sum up what many others felt when he said, “Getting it right. While price counts, making a quality product is way more important. In the long run, quality will build loyalty.”

The annual Design-2-Part survey was sent in June to manufacturing engineers and purchasing personnel who attended one of the eleven D2P Shows in the last year that take place in major manufacturing hubs across the United States. The survey yielded 436 responses from a fairly even cross section across all major manufacturing industries.

For more information about the Design-2-Part Shows or to register for free show admission, visit www.D2P.com. To learn more about LEAN and its benefits, contact the LEAN Accountants of McKonly and Asbury, LLP.